Should you be pivoting your business right now?
How do you know when to pivot, and how do you know what to pivot to?
Should you jump to a new industry to make ends meet or even make the switch altogether?
Should you ride out the storm and let it pass?
The COVID-19 pandemic has got business owners and leadership teams scrambling to answer these questions.
If you’ve been reading my articles over the last few months, then you know that unless you have the option to delay starting a new business, inaction is not an option. We have to take the lead and take decisive action right now. But what action should we take?
Over the past six months, I’ve seen many bad decisions made by leadership teams who have rightly decided to take action. The root cause of each bad decision comes down to one thing: we are pivoting when we should be innovating.
And it’s a lot more than semantics.
Why are we pivoting
Pivoting, at least the way I hear it used right now, has become some strategic cure-all. You cannot get through a strategic meeting without hearing the word at least a dozen times.
I get it. Many businesses have taken big hits in their core business. Simultaneously, fringe products/services are doing great. Here are a few examples of what I mean.
- Sales are down at a boutique distillery because bars are closed or limited. They are pivoting to producing hand-sanitizer.
- Sales are down at a marketing specialties firm because no corporate events are being held. They are pivoting to branded PPE, masks, and face-shields.
- Sales are down at a high-end dine-in restaurant. They are pivoting to online ordering and curbside pickup.
We can see from all three examples that pivoting is typically a reactionary response to an external reality. This is a great, even necessary strategy in crisis. Donald Miller accurately described it as the move from playing chess to playing tennis. You’re not thinking several moves ahead; you’re getting the ball over the net and immediately getting ready for the next shot.
But what happens when a chess player decides to pivot to tennis and stay there?
It’s not going to be pretty.
But that is exactly what many businesses are doing right now. And, honestly, it’s scaring me. It is hands-down the most concerning decision-making trend I am witnessing right now. I firmly believe that we can cause more damage by pivoting than was caused by the shutdown.
Let me explain.
Calculating the bigger threat
The full shutdown was about 2-4 months, depending on where your business is located. The intermediate shutdown, or the pullback in business we are currently experiencing, will probably last about a year. The decisions we are making to pivot right now will likely last for years or decades.
If you were making $500,000 per month before the shutdown and then went to $0 for the full shutdown, you lost about $2M.
If you come back to around 70% for the next 12 months, you would lose another $2M.
If you pivot out of your primary business and the new business doesn’t work or evaporates as the pandemic dies down, not only will you lose those new sales, you could lose market share in your core business as well!
[bctt tweet=”If you pivot out of your primary business and the new business doesn’t work or evaporates as the pandemic dies down, not only will you lose those new sales, you could lose market share in your core business as well!” username=”8figurefocus”]
You could be down 50% or more for years if your competitors were playing the long game (and in every industry, somebody is playing the long game). This would be $3M in the first year alone and could lower your growth trajectory permanently.
We should be innovating
Because pivoting is reactionary, it often leads us outside of our core market. We can’t control it. We don’t have the data or the background to predict it. We are just hoping that the market will be (and stay there).
This is dangerous, short-term thinking.
Instead of pivoting, we should be innovating. The common characteristic of every business that not only survives the crisis but actually thrives (in the long-term) because of the crisis will be innovation.
The principle difference between pivoting and innovating is that innovating is proactive, long(er)-term oriented, and it focuses first on the core-market while carefully exploring extensions of that market.
Innovation is proactive.
Innovating is a very deliberate choice. Companies that were innovating before the crisis are, in general, doing much better than companies that weren’t. They also feel less pressure to pivot and have been able to refocus on the long(er) game faster than anyone else. For these great companies, small and large innovating happens both in good times and in tough times.
Innovation is long(er)-term oriented.
Innovating is not a one-time, knee jerk reaction. It is an ongoing intentional act where you look at changes that may come in the future, and you position your company to take full advantage of them. To innovate right now, you should be working to understand what the world will look like in 12 months from now. Who do you want to serve then? What are they going to need? Who are you going to be competing with? Then what do you need to be trying and trialing now so that you are ready when the time comes.
Innovation focuses first on the core market.
This is probably the most crucial point. I have found that most successful companies are, to some extent, drinking their own Kool-Aid. They mistakenly believe that success in one market will equate to success in another. This belief causes them to underestimate how much work it is to create a new profitable, sustainable market. They forget how uncomfortable it was to develop their current market. And they don’t recognize how high the chances of failure are.
Innovation then carefully explore extensions of that market.
The safest place to pivot outside of your core market is in a market that is “attached” to your market. Innovation allows you to adapt and expand to markets that are just one step removed from your core market. This is especially critical when your core market is shrinking over the long-term. In this case, innovation sets the stage for a successful last-resort pivot—more on that in a minute.
Examples of innovation
I have seen several examples of innovation working brilliantly.
- A custom frame shop moved to online framing sessions and unlocked a whole new market outside of their previous local reach.
- A marketing workshop company that dramatically lowered the prices and cost for a virtual workshop and kept their revenue strong within their existing market using their existing content.
- A brand licensing agency that started making branded masks.
- Several companies in various industries took the time to build an online sales and marketing system to complement their face-to-face sales strategy.
These companies all suffered a major blow to the core of their business. Rather than pivoting and trying to make something from nothing or pursue a totally different market, they stopped and figured out how they could serve and even expand their existing market!
Why innovating will work where pivoting won’t
Innovation harnesses your momentum and position in your current market. Your brand, your systems, your everything are tuned to that market. Innovation builds on all of that.
- You understand your market better than you understand a new market.
- You are better at communicating to that market.
- You are better at proving your results to your existing market.
- You have more contacts in and around your current market.
- You have higher cross-selling and up-selling opportunities in your existing market.
- You have less to learn in your existing market.
- You can get better feedback directly from your market.
ALL of this really, really matters.
If at all possible, focus your attention on innovating in your current market or one that is a small step away.
If you have zero quality options to innovate, if your market is gone forever, if your market doesn’t exist now and your business won’t exist when your market comes back, then your last resort is to pivot.
Pivoting is a last resort
Not all the pivoting that is happening right now is bad. Some businesses do genuinely have to pivot. It’s tough. It’s going to be a difficult road, but if that’s what it takes for the company to survive, do it. Don’t hesitate. Move fast. It could very well be the difference between your business surviving the crisis or not.
However, before you jump straight to pivoting, stop and ask yourself, how can we be innovating right now so that we not only survive the crisis but thrive because of it?
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